3 Takeways from Google Poaching Morgan Stanley's CFO
Yesterday, it was announced that Google had hired Ruth Porat away from Morgan Stanley to be the tech firm’s new CFO. Porat had held the chief financial officer position for the venerable Morgan Stanley for the past five years and was widely considered to be the most powerful woman on Wall Street.
The move, which came two weeks after Patrick Pichette announced he was leaving his Google CFO post, was seen as a big gain for Google and a big loss for Morgan Stanley. Speaking about Porat’s departure, Morgan Stanley CEO James Gorman said, “I respect [Ruth’s] decision that now is the right time to make a change in her career, and I am excited for Ruth in her next chapter. Ruth has always maintained her ties to California, serving on the Stanford Board, visiting family, and working with clients there. I have no doubt she will succeed in her new role.”
Indeed, Porat grew up in California where Google is based (Morgan Stanley’s headquarters are in New York), she’s a Stanford grad, and she has deep ties to the tech community. However, the move was much more than a homecoming. And the following are some of the biggest takeaways from this momentous career move.
1. Silicon Valley, and not Wall Street, offers the young—and older—the most exciting career opportunities.
It’s been well documented that the young, eager, high caliber job candidates are no longer leaving their elite undergrad and graduate schools for jobs in high finance, and are instead heading to the tech sector to begin meaningful careers. One reason is this: the tech sector is where the center of the global conversation is. And Google, it could be said, is at the bull’s-eye.
Bloomberg analysts, speaking about Porat’s move, noted that the former most powerful woman on Wall Street will have a much larger balance sheet to work with at Google (and more cash to play with) and will be going to a company that affects just about every other company in the world; Google is perhaps the most important company when it comes to worldwide business because so many businesses rely on it (and not on Morgan Stanley or other Wall Street firms). Google and other tech firms are, of course, also seen as much more innovative (another draw) than firms in most other sectors, including Wall Street.
And Porat joins Google at a time when it’s at a crossroads of sorts. Google is facing monopoloy charges in Europe and needs to deal with the shift toward mobile (it, like many businesses, has based its revenue streams on consumers using desktops, but that is, of course, changing very quickly). And so, it’s a very exciting time to work at Google (it’s also likely a very stressful time). In any event, Porat joining what is arguably the sexiest firm on the planet should underline the common belief that Silicon Valley is a much more exciting place to be than Wall Street.
2. Silicon Valley is where the biggest money is.
Although you can still make it big on Wall Street despite post-crisis regulations such as the Volcker Rule, the Street is no longer the Wild Wild West where you can make a couple outandish bets and make millions upon millions in your early 20s. However, where you can do that now (or, at least, have a better chance of doing that) is the tech sector. And here’s the New York Times on the issue in one of its articles on the poaching of Porat:
It’s not that a smart, ambitious person can’t still make a boatload of money in finance, particularly in a still surging private equity industry. It’s that on the margins everything about the regulatory and economic environment is making finance look less compelling than tech industries.
And this compelling tech money is available to the inexperienced and experienced worker alike. Although Google hasn’t publicly announced what exactly it will be paying Porat, Reuters pointed out that it will likely be a lot more than she made at Morgan Stanley: “Total compensation to Google's departing CFO was twice as much as Porat's for the three years through 2013 - $62.2 million vs $29.6 million, according to public filings by the companies.”
3. Wall Street is still a man’s world. And the Street just suffered a major setback in its bid to have more women in the C-suite.
Porat had been with Morgan Stanley for many years (she initially joined in 1987, left for Smith Barney, then returned), had led numerous tech IPOs (Amazon, eBay, Netscape, Priceline), and was on her way to perhaps bigger and better jobs on the Street. Or was she?
According to some Morgan Stanley insiders, despite her very good track record, Porat was not considered a frontrunner to succeed CEO James Gorman (not that he’s looking to step down soon, but succession plans get under way well before a chief executive signals it’s time to go). In fact, there were two other Morgan Stanley bankers ahead of Porat on the succession shortlist:
Several high-level Morgan Stanley sources who have spoken to Reuters about succession planning over the past two years said she was not seen as a top contender. Instead, they pointed to two other executives—Gregory Fleming, 52, who runs wealth management and asset management, and Colm Kelleher, 57, who runs investment banking and trading—as more likely contenders. Some observers saw gender bias at play, given her qualifications and Wall Street's history as a male-dominated industry. At an event last year, Porat criticized the lack of female leadership in corporate America as "an embarrassment." "If a woman 'leans in,' but is leaning against a door that is nailed shut, no amount of leaning will bust down the door," she said.
It should also be said that Silicon Valley, like Wall Street, is not known for its warm welcome towards women (see exhibits A, B, and C). But it does have a major female CEO in Yahoo’s Marissa Mayer, and some other very senior women such as YouTube’s Susan Wojcicki and “Mrs. Lean In” herself, Facebook’s Sheryl Sandberg (and now Porat).
As for Wall Street, Porat’s departure leaves JPMorgan Chase CFO Marianne Lake as perhaps the new most powerful woman on Wall Street, with no other high-ranking female bankers in sight.
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Why Wall Streeters’ Defections to Silicon Valley Are Good News for the Economy (NYT)
Google Adds Morgan Stanley’s Porat as CFO Replacing Pichette (Bloomberg)
Google Poaches Morgan Stanley’s CFO (Reuters)
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Where the Jobs Are in New York (Hint: Everywhere but Wall Street)
Will Ruth Porat, Morgan Stanley's CFO, Rise to the Top?